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Egypt Food and Drink Report Q4 2010
Business Monitor International, Oct 2010, Pages: 56
Business Monitor International's Egypt Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Egypt's food and drink industry.
Egypt remains the most promising Middle East and North Africa consumer market with significant scope for growth across the key food and drink indicators. On the demand side, a young, aspirant and rapidly growing population – already close to 80mn – and a promising long-term macroeconomic outlook are two of the dynamics upon which our view is based. There remains huge scope across all the key food and drink industry indicators. Yet concerns remain about Egypt’s regulatory environment and the uneven distribution of income, which will need addressing if the country is to capitalise on its potential.
Headline Industry Data
- 2010 per capita food consumption = +12.49%; forecast to 2014 = +59.08%
- 2010 mass grocery retail sales = +33.1%; forecast to 2014 = +258.84%
- 2010 carbonates volume sales = +15.33%; forecast to 2014 = +81.85%
Key Company Trends
Cutting Down Tourism Reliance In Alcohol – Heineken is to place a greater emphasis on growing its inherited wine business in Egypt. Very rarely associated with wine, Heineken bought into wine when it acquired the diversified Egyptian alcoholic drinks company Al Ahram Beverages Company for about US$300mn in 2002. Given some of the unique challenges Heineken faces in Egypt in comparison to almost all of its emerging markets – the most notable being a strong reliance on the tourism industry for scale – it feels that it needs to grow the proportional contribution of domestic sales. About 90% of Egypt's near 80mn population practises Islam and does not consume alcohol. While the consumption of alcohol outside hotels is not prohibited by the government like it is in much of the Gulf region in particular, a number of advertising restrictions are enforced, making it difficult for Heineken to make headway.
Multinational Retail Interest Growing – In August 2010, it was announced that the UK-based retailer Marks & Spencer (M&S) was looking to open its first store in Egypt with its franchise partner Al Futtaim at the Dandy Mega Mall in Cairo by the end of 2010. The new 2,600m2 outlet would sell a selection of family fashion, beauty and home products. M&S also plans to open a 4,400m2 store at Cairo Festival City in 2012.
Earlier in June 2010, Earlier in June 2010, it was announced that the German retail giant Metro was about to debut its first store in Egypt with plans for a further 19.
Domestic Companies Pursuing Expansion – While multinational companies are largely leading food and drink investment spending in Egypt, domestic companies are also increasingly active. In June 2010, the diversified Egyptian food and drink firm Juhayna announced it had raised about EGP808mn (US$142.5mn) in a 1.75 times oversubscribed private share offering. This represented 80% of new Juhayna shares up for grabs, with the remaining 20% to be available to public investors in what will be Egypt’s first initial public offering since 2008.
Key Risks to Outlook
Regulatory Environment – Egypt's regulatory environment remains a concern, with the food and drink team rating it just 5/10. Infrastructure continues to misfire and internal trade systems remain weak, which contribute to Egypt being a high-cost market.
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